Mass. towns and cities have growing appetite for meals tax

Two years after towns and cities first won the option to tax 75 cents out of every $100 spent at local restaurants, nearly 42 percent of the state’s communities are biting.

David Riley

Two years after towns and cities first won the option to tax 75 cents out of every $100 spent at local restaurants, nearly 42 percent of the state’s communities are biting.

As of June, 146 municipalities had adopted a local meals tax, which lawmakers approved in 2009 to give towns and cities another way to collect local revenue as state aid and property tax collections sank during the recession.

“The fact that such a substantial number has adopted it already is not only impressive, but speaks to the fact that this is a valuable tool,” said Geoff Beckwith, executive director of the Massachusetts Municipal Association.

While the tax is less than a penny on the dollar, it adds up to much more than table scraps for some communities.

The Department of Revenue, which collects meals tax revenue and distributes it to towns and cities quarterly, will have doled out a total of $70.4 million to towns and cities during the last two fiscal years, as of June.

“Every municipality is combing its budget these days for any place to have savings or to cut services,” said Betsy DeWitt, Brookline’s selectmen chairwoman. “(The meals tax) has been a contributing factor for us, such that we’ve been able to keep our services level and intact.”

At the same time state leaders approved the optional meal tax, they also raised a cap on existing optional hotel room taxes, from 4 percent of the bill to 6 percent. As of June, 91 towns and cities collected the maximum tax; another 86 charge at a lower rate.

But neither optional tax is a boon to towns with few places to dine out, or little or no hotel industry. Some communities also have steered clear of both measures, either wary of adopting new taxes or concerned about remaining competitive with nearby towns.

In Canton, for example, a proposed meal tax died in a tie vote at Town Meeting in April. Abington voters also shot down a meals tax this spring in a 91-75 vote, with nearby communities like Hanson, Holbrook and Rockland also lacking the surcharge.

The Massachusetts Restaurant Association has opposed the optional meals tax. CEO Peter Christie said his members felt their industry was singled out.

While the tax probably has not put anyone out of business in the last two years, it has cut into customers’ discretionary spending, along with a 2009 hike in the state sales tax from 5 percent to 6.25 percent, Christie said. The sales tax also applies to meals.

“It’s a lot of money that’s taken out of the economy and sent to government,” Christie said.

But overall, the ranks of towns that charge the optional tax are still growing. Twenty-two towns adopted meals taxes this year alone, including Ipswich, Chatham, Sherborn, Falmouth and Foxboro, which passed the measure on its third try in May.

Meanwhile, only five communities adopted or amended hotel taxes this year – Southborough, Tewksbury, Wareham, Adams and Bernardston.

In some towns, the meals tax has brought in slightly less money than the state estimated when the option first became available. In Barnstable, for example, the tax has generated about $490,000 over the last seven months, or about 84 percent of the state’s projections, said town Finance Director Mark Milne.

Nonetheless, municipal officials in most communities that have adopted the meals tax said the extra money has been helpful in maintaining local services.

In Hudson, Executive Assistant Paul Blazar said the tax has minimal effect on customers while helping the town to avoid laying off teachers, police and firefighters. The meals tax has brought in more than $209,000 for the town this fiscal year.

In towns like Bedford, where thousands of commuters come daily for work or education, a meals tax is one way they contribute to local infrastructure, Town Manager Richard Reed said.

“Every little bit of revenue is helpful, particularly in a period when revenues are restrained,” Reed said.

In Barnstable, where tourism bolsters meal and hotel tax collections, the combined measures are expected to raise about $1.8 million a year, Milne said. The town hopes to dedicate the extra revenue to a project to connect thousands of residents with septic systems to a sewage treatment facility in Hyannis, he said.

The project, meant to address environmental and health concerns about failing septic systems, otherwise would be difficult to fund.

“This really will be, I think, a considerable revenue source that will really help us address this problem,” Milne said.

DeWitt said Brookline consulted with merchants before adopting the meals tax. While some were initially uncomfortable with the idea, DeWitt said she has heard little feedback or criticism of the measure since then.

Brookline also looked at whether Newton, Boston and other nearby communities adopted the tax before agreeing to it locally.

While the local option is helpful, it does not address bigger questions about reliance on property taxes to fund the vast majority of municipal services, DeWitt said.

“There’s clearly a bigger debate around what the most fair, reasonable, equitable way of raising public revenues is, and I don’t think we’ve really addressed that,” she said.

(David Riley can be reached at 508-626-3919 or driley@wickedlocal.com.)